Why Warren Buffett doesn't invest in gold.

Gold prices have hit record highs, but historically, Warren Buffett has almost always said no to the precious metal, believing it to be an asset that doesn't generate value.

At the close of trading on Friday, the spot price of gold in the world market was $2,343 per ounce, down more than $30. However, during the session, the precious metal briefly reached $2,429 – a new record high. Domestically, the price of gold also decreased, hovering around 83 million VND per tael. Previously, gold bars peaked at 85 million VND, and 24K gold rings also reached 78 million VND per tael.

Investors offer various reasons for owning gold. In some ways, the precious metal has been considered currency for centuries. But others maintain that gold is an asset that sits idle in a safe, doesn't generate anything, and therefore has no surplus value. That's why the world's most famous investor, Warren Buffett, never invests in gold.

In his 2011 letter to shareholders, he pointed out that with the money to buy all the gold in the world, an investor could buy all the farmland in the US and still have enough left over to own 16 ExxonMobil corporations – the world's largest oil and gas giants by revenue. Over time, these things would yield abundant harvests and substantial dividends. Meanwhile, those who buy gold would only have a stash of gleaming metal bars.

He also argued that gold has some industrial and decorative applications, but the demand for these purposes is limited and doesn't create new products. "If you own an ounce of gold, you'll end up with only one ounce," billionaire Warren Buffett once wrote.

Warren Buffett during a press interview in 2018. Photo: CNBC — Warren Buffett during a press interview in 2018. Photo: *CNBC*

The 90-year-old billionaire divides market investments into three categories. First, cash investments, including savings accounts, bonds, and other similar low-risk investments. Second, utility assets, those that can appreciate over time and generate value, such as stocks or rental properties.

Finally, there are assets that do not create value, and gold falls into this category.

William Bernstein, author of "The Four Pillars of Investing," argues that when all other investment channels are down, gold is likely to perform well. However, in the long run, investors will benefit more from growth assets that yield compounded returns. Therefore, he prefers Warren Buffett's view of not investing in gold.

Generally, when markets are risky, investors tend to flee assets like stocks and seek safe havens, including gold and bonds. This means that demand for precious metals will increase before and during recessions.

Ford O'Neill, co-manager of a portfolio at Fidelity Strategic Real Return Fund, a mutual fund strategy focused on protecting investors from inflation risk, said that, theoretically, the recent upward trend in gold prices is somewhat strange. "We're seeing a range of assets surge in value, from stocks and bonds to cryptocurrencies. So why is gold still hitting records?" he questioned.

Gold prices typically move inversely to interest rates because the precious metal does not pay fixed interest. Therefore, when interest rates rise, investors are attracted to higher-yielding investment channels, such as bonds. Conversely, in a low-interest-rate environment, gold is more attractive.

While the current economic scenario may support gold prices, Tim Hayes, global investment strategist at Ned Davis Research, suggests it should only be viewed as an asset to diversify a portfolio. "Don't make gold the backbone of your investment portfolio," he emphasized.

Xiao Gu (according to CNBC )

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